2024-04-15 07:00:00 ET
Summary
- The March 3.5% CPI reading came in hot, suggesting the Fed will avoid cutting interest rates until September.
- Equities typically perform poorly in rising-rate environments, yet the insurance industry offers a profitable business model that tends to maintain revenue streams in up-and-down markets.
- Palomar Holdings is a P&C insurance company that is +36% YTD, impressively beat Q4 2023 +17%, and expects 20% bottom line growth for FY24.
- Due to sector weakness and inflation concerns, the stock recently dipped, presenting a potential 'buy' opportunity given its strong fundamentals.
- Palomar is a small-cap stock offering investors growth and profitability. It has produced long-term returns and can serve as a potential hedge against inflation.
Insurance Stocks: An Inflation Hedge With Return Potential
The pain of inflation and rate hikes are eating into investors’ portfolios. Insurance stocks can be attractive in these environments for two key reasons:
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Given the diversified income streams, insurance – a necessity for homes, vehicles, and more – can offer profitable and less volatile investments.
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Insurance stocks often gain advantages amid increasing interest rates. Elevated rates generally result in higher yields from insurance firms’ investments, notably fixed-income assets such as bonds.
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Financial Stock On The Move: Palomar Holdings (SA Quant)